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Biggera Waters Community Bank BranchHelensvale Community Bank Branch
Broadwater FinancialServices LimitedABN 29 095 850 463
2019 Annual Report
Broadwater Financial Services Limited Annual Report 1
Chairman’s report 2
Senior Manager’s report 3
Bendigo and Adelaide Bank report 4
Directors’ report 5
Auditor’s independence declaration 9
Financial statements 10
Notes to the financial statements 14
Directors’ declaration 38
Independent audit report 39
Contents
2 Annual Report Broadwater Financial Services Limited
For year ending 30 June 2019
The financial year ended June 2019 for Broadwater Financial Services Limited has continued to be challenging in the
local area but also because of the Hayne Royal Commission which has painted all banks in a negative frame. On a
positive note however, net overall footings increased by $13.2 million finishing the year on $135 million which is a
record high for our company. Our Senior Manager’s report further analyses these numbers. Revenue has increased by
approximately 5% and with a small reduction in expenses the net loss for the year after income tax credit is $32,404,
an improvement of $9,559 over last year. The Balance sheet for the company at June 2019 shows a Net Liabilities
position of $124,121 and as referred to in Note 1 on page 16 of this Annual Report, the Directors adopt a going
concern approach to the Financial Statements and continue to receive an undertaking of support from Bendigo and
Adelaide Bank Limited.
During the last financial year we have experienced very good improvement with the staffing in our branches, and as a
Board we are very proud of their achievements in another difficult trading year. As I reported last year the Board believe
that we have the best mix of committed and enthusiastic people to continue to drive results in both of our branches.
Our Senior Branch Manager, Mr Peter Kai-Nielsen, has had another very successful year in building community
relationships in our area and we remain confident that the long-term results will be very positive and generate
considerable growth for the company. The Board also congratulates Peter for his leadership of the team once again
during the last year and look forward to supporting him in the years ahead.
The Board are embarking on a bold and challenging plan to rejuvenate the company in the next year with the support of
senior management of Bendigo and Adelaide Bank Limited and expect that the result of this plan will quickly return the
company back to profit, and therefore dividends to the shareholders and further benefit our community partners. We
are hopeful that more details of this plan will be available at the Annual General Meeting.
The company continues to support our local community groups with sponsorship funds and we are fortunate that
Bendigo and Adelaide Bank Limited provide a Market Development Fund which assists with our contributions and the
support of these community partners and also funds our advertising and marketing both locally, in the Gold Coast
region and nationally. For the first time I believe that the Bendigo Bank national advertising campaign is having the
desired effect and making a difference in the community.
Since the last Annual Report our Board has unfortunately decreased by one with the sad passing of Trevor Jones
which was alluded to in my report last year. Trevor has been missed in our meetings and we again pass on our
condolences to his partner Pam and his family. Our volunteer Directors spend many personal hours attending Board
meetings, committee meetings, Director workshops, business development events, conferences and providing
community partner support. I would like to take the opportunity to acknowledge this dedication and work and I thank
them for their continual support. The Board again thanks our personal assistant, Mrs Maris Dirkx, for her outstanding
efforts in secretarial support, marketing strategies, assistance in organising company events and liaison with our
community partners.
Finally, as a Board, we again wish to thank all our customers, community organisations and local business owners
for their support during the year and in addition we would also like to acknowledge the support and assistance
from senior management of Bendigo and Adelaide Bank Limited during the year. It is their commitment and ours to
grow the business to achieve consistent profits and returns to our patient shareholders. In closing, I again thank all
shareholders for their continued support and look forward to a more positive future for the company.
Robert Knight
Chairman
Chairman’s report
Broadwater Financial Services Limited Annual Report 3
For year ending 30 June 2019
The 2018/19 year was one of consolidation and progress for both of our branches.
The tighter lending restrictions through APRA and the impact of the Hayne Royal Commission was clearly evident
through the reduction in loan applications and approvals over the past 12 months.
Despite these challenges faced by the staff, our book recorded strong growth of $13.2 million following on the growth
of $10 million in the last financial year.
Loan settlements as at 30 June 2019 totalled $15.6 million which represents a decrease from the previous year’s
settlements by $2.7 million. Despite the reduction, our Loan book grew by $9.3 million ($4.9 million increase from
last financial year). Discharges reduced to $5.9 million (from $6.4 million last year) and our deposit holdings grew by
$3.9 million, albeit not as strong as last year’s deposit growth of $5.4 million.
The combined portfolio now stands at $135 million consisting of $74 million in lending, $55 million in deposits and
$6 million in Off Balance sheet products (i.e. Insurances, Sandhurst, and Financial Planning products) across both our
branches.
Similar to last year, our customer and transaction numbers increased over the year however there was a notable trend
to diminishing in-branch transactions across the last quarter. The impact of this should not be underestimated and the
challenges that face not only our staff but the Bank as a whole is trying to engage with those customers who no longer
attend our branches.
On the community front, we continued to support and promote our local sporting and not-for-profit associations.
Sponsorship was provided to eleven different associations throughout the year and the return is evident with new
opportunities generated through the majority of our referral agencies.
Regionally, Bendigo Bank, Gold Coast continued to support corporate relationships held with the Gold Coast Hospital
Foundation and the QLD Master Builders Association. Through our own involvement in these relationships comes
greater opportunities for our two branches to identify to new Bendigo Bank customers.
Staffing again was re-addressed (and will continue to be going forward) as we evolve and adapt to this changing
market. Emphasis is now firmly placed on a sales culture and to drive those external community partner relationships
to ensure continued growth for our business.
There will always be challenges ahead but I remain confident that our staff and Board are the right team to drive our
business forward, be it engaging with our existing customers, community partners, or the local businesses owners
and residents.
In closing, I would like to thank our staff and our dedicated Board of Directors, our patient shareholders and finally our
customers for their contribution and ongoing support to our Community Bank branches.
Peter Kai-Nielsen
Senior Branch Manager
Senior Manager’s report
4 Annual Report Broadwater Financial Services Limited
For year ending 30 June 2019
As a Bank of 160-plus years, we’re proud to hold the mantle of Australia’s fifth biggest bank. In today’s banking
environment it’s time to take full advantage of this opportunity and for even more people to experience banking with
Bendigo Bank and our way of banking, and with our Community Bank partners.
In promoting our point of difference it’s sometimes lost that although we’re different, we’re represented in more than
500 communities across Australia and offer a full suite of banking and financial products and services. In many ways
we’re also a leader in digital technology and meeting the needs of our growing online customer base, many of whom
may never set foot in a traditional bank branch.
At the centre of our point of difference is the business model you chose to support as a shareholder that supports
local communities. Whether you’re a shareholder of our most recent Community Bank branch which opened in
Smithton, Tasmania, in June 2019, or you’re a long-time shareholder who, from more than 20 years ago, you all play an
important role. Your support has enabled your branch, and this banking model, to prosper and grow. You’re one of more
than 75,000 Community Bank company shareholders across Australia who are the reason today, we’re Australia’s only
bank truly committed to the communities it operates in.
And for that, we thank you. For the trust you’ve not only put in Bendigo and Adelaide Bank, but the faith you’ve put in
your community and your Community Bank company local Board of Directors.
Bendigo and Adelaide Bank continues to rank at the top of industry and banking and finance sector awards. We have
awards for our customer service, we have award winning products and we have a customer base that of 1.7 million-plus
that not only trusts us with their money, but which respects our ‘difference’.
As a Bank, we’re working hard to ensure that those who are not banking with us, and not banking with your
Community Bank branch, make the change. It really is a unique model and we see you, the shareholder, as playing a
key role in helping us grow your local Community Bank business. All it takes is a referral to your local Branch Manager.
They’ll do the rest.
We find that our customer base is a very loyal group. It’s getting people to make the change that’s the challenge.
In today’s environment, we’ve never had a better chance to convince people to make the change and your support in
achieving this is critical.
From Bendigo and Adelaide Bank, once again, thank you for your ongoing support of your Community Bank branch and
your community.
We would also like to thank and acknowledge the amazing work of your branch staff and Directors in developing your
business and supporting the communities that you live and work in.
Mark Cunneen
Head of Community Support
Bendigo and Adelaide Bank
Bendigo and Adelaide Bank report
Broadwater Financial Services Limited Annual Report 5
For the financial year ended 30 June 2019
Your directors submit the financial statements of the company for the financial year ended 30 June 2019.
Directors
The names and details of the company’s directors who held office during or since the end of the financial year:
Robert John Knight
Chairman
Occupation: Business Consultant and Real Estate Business Owner
Qualifications, experience and expertise: Bachelor of Commerce, former Chartered Accountant, Financial Controller
and Public Company Secretary.
Special responsibilities: Executive Management Committee
Interest in shares: 667
Leeanne Kay Braund
Secretary
Occupation: Practice Manager at Pindara Hospital
Qualifications, experience and expertise: Former Consultant to Queensland Health and former Mortgage Broker.
Currently Secretary of the Discovery Park Tennis Club in Helensvale.
Special responsibilities: Executive Management Committee
Interest in shares: Nil
Stephen Michael O’Donoghue
Director
Occupation: Pharmacist
Qualifications, experience and expertise: Local Pharmacist.
Special responsibilities: Nil
Interest in shares: 42,667
Michael Douglas McCarthy
Director
Occupation: Sales Consultant
Qualifications, experience and expertise: Former Insurance Manager for Woolworths NSW for 19 years and Real
Estate Sales Consultant.
Special responsibilities: Nil
Interest in shares: Nil
Malcolm John Orman
Director (Appointed 4 August 2018)
Occupation: Chartered Accountant
Qualifications, experience and expertise: Chartered Accountant in public practice for 35 years and have been
running my own firm for the last 18 years.
Special responsibilities: Nil
Interest in shares: Nil
Directors’ report
6 Annual Report Broadwater Financial Services Limited
Directors (continued)
Trevor Newton Jones
Director (Resigned 18 October 2018)
Occupation: Licensed Real Estate Agent
Qualifications, experience and expertise: Former Real Estate Sales Manager, Finance Broker and Business Owner.
Special responsibilities: Executive Management Committee, Community Engagement Committee
Interest in shares: Nil
Directors were in office for this entire year unless otherwise stated.
No directors have material interests in contracts or proposed contracts with the company.
Company Secretary
The company secretary is Leeanne Braund. Leeanne was appointed to the position of secretary on 26 April 2013.
Leeanne holds a Certificate IV in Finance and Mortgages. She has held numerous executive roles for Touch Football
Committees and currently the Secretary of the Discovery Park Tennis Club in Helensvale. Leeanne is employed as a
Medical Practice Manager.
Principal Activities
The principal activities of the company during the financial year were facilitating Community Bank services under
management rights to operate franchised branches of Bendigo and Adelaide Bank Limited.
There have been no significant changes in the nature of these activities during the year.
Operating results
Operations have continued to perform in line with expectations. The loss of the company for the financial year after
provision for income tax was:
Year ended 30 June 2019$
Year ended 30 June 2018$
(32,404) (41,963)
Dividends
No dividends were declared or paid for the previous year and the directors recommend that no dividend be paid for the
current year.
Significant changes in the state of affairs
In the opinion of the directors there were no significant changes in the state of affairs of the company that occurred
during the financial year under review not otherwise disclosed in this report or the financial statements.
Events since the end of the financial year
There are no matters or circumstances that have arisen since the end of the financial year that have significantly
affected or may significantly affect the operations of the company the results of those operations or the state of affairs
of the company, in future years.
Likely developments
The company will continue its policy of facilitating banking services to the community.
Directors’ report (continued)
Broadwater Financial Services Limited Annual Report 7
Environmental regulation
The company is not subject to any significant environmental regulation.
Directors’ benefits
No director has received or become entitled to receive, during or since the financial year, a benefit because of a
contract made by the company, controlled entity or related body corporate with a director, a firm which a director is a
member or an entity in which a director has a substantial financial interest.
Indemnification and insurance of directors and officers
The company has indemnified all directors and the manager in respect of liabilities to other persons (other than the
company or related body corporate) that may arise from their position as directors or manager of the company except
where the liability arises out of conduct involving the lack of good faith.
Disclosure of the nature of the liability and the amount of the premium is prohibited by the confidentiality clause of the
contract of insurance. The company has not provided any insurance for an auditor of the company or a related body
corporate.
Directors’ meetings
The number of directors’ meetings attended by each of the directors of the company during the year were:
Directors’ Meetings
Community Engagement
A B A B
Robert John Knight 11 10 - -
Leeanne Kay Braund 11 11 2 1
Stephen Michael O'Donoghue 11 3 - -
Michael Douglas McCarthy 11 11 2 2
Malcolm John Orman (Appointed 4 August 2018) 10 5 - -
Trevor Newton Jones (Resigned 18 October 2018) 3 3 - -
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the company, or to intervene in any proceedings to which the company is a party, for the purpose of taking
responsibility on behalf of the company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the company with leave of the Court under section 237
of the Corporations Act 2001.
Non audit services
The company may decide to employ the auditor on assignments additional to their statutory duties where the auditor’s
expertise and experience with the company are important. Details of the amounts paid or payable to the auditor
(Andrew Frewin Stewart) for audit and non audit services provided during the year are set out in the notes to the
accounts.
The board of directors has considered the position and is satisfied that the provision of the non-audit services is
compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
Directors’ report (continued)
8 Annual Report Broadwater Financial Services Limited
Non audit services (continued)
The directors are satisfied that the provision of non-audit services by the auditor, as set out in the notes did not
compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed by the board to ensure they do not impact on the impartiality and
objectivity of the auditor
• none of the services undermine the general principles relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a
management or a decision-making capacity for the company, acting as advocate for the company or jointly sharing
economic risk and rewards.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set
out on page 9.
Signed in accordance with a resolution of the board of directors at Biggera Waters, Queensland on 24 September 2019.
Robert John Knight
Chairman
Directors’ report (continued)
Broadwater Financial Services Limited Annual Report 9
Lead auditor’s independence declaration under section 307C of the Corporations Act 2001 to the directors of Broadwater Financial Services Limited As lead auditor for the audit of Broadwater Financial Services Limited for the year ended 30 June 2019, I declare that, to the best of my knowledge and belief, there have been: i) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation
to the audit; and ii) no contraventions of any applicable code of professional conduct in relation to the audit.
Andrew Frewin Stewart Joshua Griffin 61 Bull Street, Bendigo Vic 3550 Lead Auditor Dated: 24 September 2019
5
Auditor’s independence declaration
10 Annual Report Broadwater Financial Services Limited
Financial statementsStatement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2019
Notes 2019 2018 $ $
Revenue from ordinary activities 4 1,031,541 983,849
Employee benefits expense (658,338) (633,772)
Charitable donations, sponsorship, advertising and promotion (30,274) (34,831)
Occupancy and associated costs (147,049) (152,589)
Systems costs (36,902) (35,158)
Depreciation and amortisation expense 5 (41,765) (44,180)
Finance costs 5 (24,721) (22,428)
General administration expenses (138,325) (117,632)
Loss before income tax credit (45,833) (56,741)
Income tax credit 6 13,429 14,778
Loss after income tax credit (32,404) (41,963)
Total comprehensive income for the year attributable to the
ordinary shareholders of the company: (32,404) (41,963)
Earnings per share ¢ ¢
Basic earnings per share 23 (5.47) (7.09)
The accompanying notes form part of these financial statements.
Broadwater Financial Services Limited Annual Report 11
Financial statements (continued)
Balance Sheet as at 30 June 2019
Notes 2019 2018 $ $
ASSETS
Current assets
Cash and cash equivalents 7 25,500 24,417
Trade and other receivables 8 42,050 56,033
Total current assets 67,550 80,450
Non-current assets
Property, plant and equipment 9 204,050 216,759
Intangible assets 10 57,453 82,075
Deferred tax asset 11 165,816 152,386
Total non-current assets 427,319 451,220
Total assets 494,869 531,670
LIABILITIES
Current liabilities
Trade and other payables 12 90,684 58,569
Borrowings 13 330,417 298,309
Provisions 14 10,878 10,491
Total current liabilities 431,979 367,369
Non-current liabilities
Trade and other payables 12 27,085 81,255
Borrowings 13 149,723 170,132
Provisions 14 10,203 4,631
Total non-current liabilities 187,011 256,018
Total liabilities 618,990 623,387
Net liabilities (124,121) (91,717)
EQUITY
Issued capital 15 406,858 406,858
Accumulated losses 16 (530,979) (498,575)
Total equity (124,121) (91,717)
The accompanying notes form part of these financial statements.
12 Annual Report Broadwater Financial Services Limited
Financial statements (continued)
Statement of Changes in Equity for the year ended 30 June 2019
Issued Accumulated Total capital losses equity $ $ $
Balance at 1 July 2017 406,858 (456,612) (49,754)
Total comprehensive income for the year - (41,963) (41,963)
Transactions with owners in their capacity as owners:
Shares issued during period - - -
Costs of issuing shares - - -
Dividends provided for or paid - - -
Balance at 30 June 2018 406,858 (498,575) (91,717)
Balance at 1 July 2018 406,858 (498,575) (91,717)
Total comprehensive income for the year - (32,404) (32,404)
Transactions with owners in their capacity as owners:
Shares issued during period - - -
Costs of issuing shares - - -
Dividends provided for or paid - - -
Balance at 30 June 2019 406,858 (530,979) (124,121)
The accompanying notes form part of these financial statements.
Broadwater Financial Services Limited Annual Report 13
Financial statements (continued)
Statement of Cash Flows for the year ended 30 June 2019
Notes 2019 2018 $ $
Cash flows from operating activities
Receipts from customers 1,146,608 1,075,357
Payments to suppliers and employees (1,103,447) (1,091,330)
Interest paid (24,721) (22,428)
Net cash provided by/(used in) operating activities 17 18,440 (38,401)
Cash flows from investing activities
Payments for property, plant and equipment (4,434) (8,115)
Payments for intangible assets (24,622) (30,778)
Net cash used in investing activities (29,056) (38,893)
Cash flows from financing activities
Repayment of borrowings (15,282) (14,638)
Net cash used in financing activities (15,282) (14,638)
Net decrease in cash held (25,898) (91,932)
Cash and cash equivalents at the beginning of the financial year (245,827) (153,895)
Cash and cash equivalents at the end of the financial year 7(a) (271,725) (245,827)
The accompanying notes form part of these financial statements.
14 Annual Report Broadwater Financial Services Limited
For year ended 30 June 2019
Note 1. Summary of significant accounting policies
a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards
and Interpretations issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The
company is a for-profit entity for the purpose of preparing the financial statements.
Compliance with IFRS
These financial statements and notes comply with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the company’s accounting policies. These areas
involving a higher degree of judgement or complexities, or areas where assumptions and estimates which are
significant to the financial statements are disclosed in note 3.
Historical cost convention
The financial statements have been prepared under the historical cost convention on an accruals basis as modified by
the revaluation of financial assets and liabilities at fair value through profit or loss and where stated, current valuations
of non-current assets. Cost is based on the fair values of the consideration given in exchange for assets.
Comparative figures
Where required by Australian Accounting Standards comparative figures have been adjusted to conform with changes in
presentation for the current financial year.
Application of new and amended accounting standards
There are two new accounting standards which have been issued by the AASB that became mandatorily effective for
accounting periods beginning on or after 1 January 2018, and are therefore relevant for the current financial year.
AASB 15 Revenue from Contracts with Customers
AASB 15 replaces AASB 111 Construction Contracts, AASB 118 Revenue and related Interpretations and it applies,
with limited exceptions, to all revenue arising from contracts with customers. AASB 15 establishes a five-step model to
account for revenue arising from contracts with customers and requires that revenue be recognised at an amount that
reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a
customer.
AASB 15 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances
when applying each step of the model to contracts with their customers. The standard also specifies the accounting
for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, the
standard requires extensive disclosures.
The existing revenue recognition through the monthly Bendigo and Adelaide Bank Limited profit share provides an
accurate reflection of consideration received in exchange for the transfer of services to the customer. Therefore based
on our assessment this accounting standard has not materially affected any of the amounts recognised in the current
period and is not likely to affect future periods.
Notes to the financial statements
Broadwater Financial Services Limited Annual Report 15
Note 1. Summary of significant accounting policies (continued)
a) Basis of preparation (continued)
Application of new and amended accounting standards (continued)
AASB 9 Financial Instruments
AASB 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some
contracts to buy or sell non-financial items. This standard replaces AASB 139 Financial Instruments: Recognition and
Measurement.
Based on our assessment this accounting standard has not had any impact on the carrying amounts of financial
assets or liabilities at 1 July 2018. For additional information about accounting policies relating to financial
instruments, see Note 1 k).
There are also a number of accounting standards and interpretations issued by the AASB that become effective in
future accounting periods.
Only AASB 16, effective for the annual reporting period beginning on or after 1 January 2019 is likely to impact the
company. AASB 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a
right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to
make lease payments. There are recognition exemptions for short-term leases and leases of low-value items. Lessor
accounting remains similar to the current standard – i.e. lessors continue to classify leases as finance or operating
leases.
AASB 16 replaces existing leases guidance, including AASB 117 Leases and related Interpretations. This standard is
mandatory for annual reporting periods beginning on or after 1 January 2019.
The company plans to apply AASB 16 initially on 1 July 2019, using the modified retrospective approach. Therefore, the
cumulative effect of adopting AASB 16 will be recognised as an adjustment to the opening balance of retained earnings
at 1 July 2019, with no restatement of comparative information.
The company has assessed the estimated impact that initial application of AASB 16 will have on its financial
statements. The actual impacts of adopting the standard on 1 July 2019 may change.
The company will recognise new assets and liabilities for operating leases of its branches. The nature of expenses
related to these leases will now change as the company will recognise a depreciation charge for right-of-use assets
and interest expense on lease liabilities. Previously, the company recognised operating lease expense on a straight-line
basis over the term of the lease.
No significant impact is expected for the company’s finance leases.
Based on the information currently available, the company estimates that it will recognise additional lease liabilities
and new right-of-use assets of $207,711.
Economic dependency - Bendigo and Adelaide Bank Limited
The company has entered into a franchise agreement with Bendigo and Adelaide Bank Limited that governs the
management of the Community Bank branches at Biggera Waters and Helensvale, Queensland.
The branches operate as a franchise of Bendigo and Adelaide Bank Limited, using the name “Bendigo Bank” and the
logo and system of operations of Bendigo and Adelaide Bank Limited. The company manages the Community Bank
branches on behalf of Bendigo and Adelaide Bank Limited, however all transactions with customers conducted through
the Community Bank branches are effectively conducted between the customers and Bendigo and Adelaide Bank
Limited.
Notes to the financial statements (continued)
16 Annual Report Broadwater Financial Services Limited
Note 1. Summary of significant accounting policies (continued)
a) Basis of preparation (continued)
Economic dependency - Bendigo and Adelaide Bank Limited (continued)
All deposits are made with Bendigo and Adelaide Bank Limited, and all personal and investment products are products
of Bendigo and Adelaide Bank Limited, with the company facilitating the provision of those products. All loans,
leases or hire purchase transactions, issues of new credit or debit cards, temporary or bridging finance and any other
transaction that involves creating a new debt, or increasing or changing the terms of an existing debt owed to Bendigo
and Adelaide Bank Limited, must be approved by Bendigo and Adelaide Bank Limited. All credit transactions are made
with Bendigo and Adelaide Bank Limited, and all credit products are products of Bendigo and Adelaide Bank Limited.
The company promotes and sells the products and services, but is not a party to the transaction.
The credit risk (i.e. the risk that a customer will not make repayments) is for the relevant Bendigo and Adelaide Bank
Limited entity to bear as long as the company has complied with the appropriate procedures and relevant obligations
and has not exercised a discretion in granting or extending credit.
Bendigo and Adelaide Bank Limited provides significant assistance in establishing and maintaining the Community
Bank branches franchise operations. It also continues to provide ongoing management and operational support and
other assistance and guidance in relation to all aspects of the franchise operation, including advice and assistance in
relation to:
• design, layout and fit out of the Community Bank branches
• training for the branch manager and other employees in banking, management systems and interface protocol
• methods and procedures for the sale of products and provision of services
• security and cash logistic controls
• calculation of company revenue and payment of many operating and administrative expenses
• the formulation and implementation of advertising and promotional programs
• sales techniques and proper customer relations.
Going concern
The net liabilities of the company as at 30 June 2019 were $124,121 and the loss made for the year was $32,404,
bringing accumulated losses to $530,979.
In addition: $
Total assets were 494,869
Total liabilities were 618,990
Operating cash flows were 18,440
There was a 23% decrease in the loss recorded for the financial year ended 30 June 2019 when compared to the
prior year.
The company meets its day to day working capital requirements through an overdraft facility. The overdraft has an
approved limit of $350,000 and was drawn to $297,225 as at 30 June 2019.
The company’s business activities, together with the factors likely to affect its future development, performance and
position are set out in the directors’ report on pages 5 to 8. The financial position of the company, its cash flows,
liquidity position and borrowing facilities are described in the financial statements.
The current economic environment is difficult and while revenue continues to increase the company has again reported
an operating loss for the year before tax. The directors consider that the outlook presents significant challenges in
terms of banking business volume and pricing as well as for operating costs. Whilst the directors have instituted
measures to preserve cash and secure additional finance, these circumstances create material uncertainties over
future trading results and cash flows.
Notes to the financial statements (continued)
Broadwater Financial Services Limited Annual Report 17
Note 1. Summary of significant accounting policies (continued)
a) Basis of preparation (continued)
Going concern (continued)
The company’s forecasts and projections, taking account of reasonably possible changes in trading performance, show
that the company should trade within its overdraft facility.
The company has also obtained an undertaking of support from Bendigo and Adelaide Bank Limited that it will continue
to support the company and its operations for the 2019/20 financial year. This support is provided on the basis
that the company continues to fulfil its obligations under the franchise agreement and continues to work closely with
Bendigo and Adelaide Bank Limited to further develop its business.
The directors have concluded that the combination of the circumstances above represents a material uncertainty that
casts significant doubt upon the company’s ability to continue as a going concern and that, therefore, the company may
be unable to realise its assets and discharge its liabilities in the normal course of business.
Nevertheless, after making enquiries and considering the uncertainties described above, the directors have a
reasonable expectation that the company has adequate resources to continue in operational existence for the
foreseeable future. For these reasons, they continue to adopt the going concern basis of accounting in preparing the
annual financial statements.
The following is a summary of the material accounting policies adopted by the company in the preparation of the
financial statements. The accounting policies have been consistently applied, unless otherwise stated.
b) Revenue
Revenue arises from the rendering of services through its franchise agreement with the Bendigo and Adelaide Bank
Limited. The revenue recognised is measured by reference to the fair value of consideration received or receivable,
excluding sales taxes, rebates, and trade discounts.
Interest and fee revenue is recognised when earned. The gain or loss on disposal of property, plant and equipment is
recognised on a net basis and is classified as income rather than revenue. All revenue is stated net of the amount of
Goods and Services Tax (GST).
Revenue calculation
The franchise agreement provides that three forms of revenue may be earned by the company – margin, commission
and fee income. Bendigo and Adelaide Bank Limited decides the form of revenue the company earns on different types
of products and services.
The revenue earned by the company is dependent on the business that it generates. It may also be affected by other
factors, such as economic and local conditions, for example, interest rates.
Core banking products
Bendigo and Adelaide Bank Limited has identified some Bendigo Bank Group products and services as ‘core banking
products’. It may change the products and services which are identified as core banking products by giving the
company at least 30 days notice. Core banking products currently include Bendigo Bank branded home loans, term
deposits and at call deposits.
Margin
Margin is arrived at through the following calculation:
• Interest paid by customers on loans less interest paid to customers on deposits
• plus any deposit returns i.e. interest return applied by Bendigo and Adelaide Bank Limited for a deposit,
• minus any costs of funds i.e. interest applied by Bendigo and Adelaide Bank Limited to fund a loan.
Notes to the financial statements (continued)
18 Annual Report Broadwater Financial Services Limited
Note 1. Summary of significant accounting policies (continued)
b) Revenue (continued)
Margin (continued)
Margin is paid on all core banking products. A funds transfer pricing model is used for the method of calculation of the
cost of funds, deposit return and margin.
The company is entitled to a share of the margin earned by Bendigo and Adelaide Bank Limited (i.e. income adjusted
for Bendigo and Adelaide Bank Limited’s interest expense and interest income return). However, if this reflects a loss,
the company incurs a share of that loss.
Commission
Commission is a fee paid for products and services sold. It may be paid on the initial sale or on an ongoing basis.
Commission is payable on the sale of an insurance product such as home contents. Examples of products and
services on which ongoing commissions are paid include leasing and Sandhurst Trustees Limited products.
Fee income
Fee income is a share of what is commonly referred to as ‘bank fees and charges’ charged to customers by Bendigo
Bank Group entities including fees for loan applications and account transactions.
Discretionary financial contributions
In addition to margin, commission and fee income, and separate from the franchise agreement, Bendigo and Adelaide
Bank Limited has also made discretionary financial payments to the company. These are referred to by Bendigo and
Adelaide Bank Limited as a “Market Development Fund” (MDF).
The amount has been based on the volume of business attributed to a branch. The purpose of the discretionary
payments is to assist with local market development activities, including community sponsorships and donations. It is
for the board to decide how to use the MDF.
The payments from Bendigo and Adelaide Bank Limited are discretionary and Bendigo and Adelaide Bank Limited may
change the amount or stop making them at any time.
Ability to change financial return
Under the franchise agreement, Bendigo and Adelaide Bank Limited may change the form and amount of financial
return that the company receives. The reasons it may make a change include changes in industry or economic
conditions or changes in the way Bendigo and Adelaide Bank Limited earns revenue.
The change may be to the method of calculation of margin, the amount of margin, commission and fee income or a
change of a margin to a commission or vice versa. This may affect the amount of revenue the company receives on a
particular product or service. The effect of the change on the revenue earned by the company is entirely dependent on
the change.
If Bendigo and Adelaide Bank Limited makes a change to the margin or commission on core banking products and
services, it must not reduce the margin and commission the company receives on core banking products and services
Bendigo and Adelaide Bank Limited attributes to the company to less than 50% (on an aggregate basis) of Bendigo
and Adelaide Bank Limited’s margin at that time. For other products and services, there is no restriction on the change
Bendigo and Adelaide Bank Limited may make.
Bendigo and Adelaide Bank Limited must give the company 30 days notice before it changes the products and services
on which margin, commission or fee income is paid, the method of calculation of margin and the amount of margin,
commission or fee income.
Notes to the financial statements (continued)
Broadwater Financial Services Limited Annual Report 19
Note 1. Summary of significant accounting policies (continued)
b) Revenue (continued)
Monitoring and changing financial return
Bendigo and Adelaide Bank Limited monitors the distribution of financial return between Community Bank companies
and Bendigo and Adelaide Bank Limited on an ongoing basis.
Overall, Bendigo and Adelaide Bank Limited has made it clear that the Community Bank model is based on the
principle of shared reward for shared effort. In particular, in relation to core banking products and services, the aim is
to achieve an equal share of Bendigo and Adelaide Bank Limited’s margin.
Current tax
Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable
profit or loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively
enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent
that it is unpaid (or unrefunded).
c) Income tax
Deferred tax
Deferred tax is accounted for using the balance sheet liability method on temporary differences arising from
differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax
base of those items.
In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are
recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible
temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities
are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and
liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit.
Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the
asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted
or substantively enacted by reporting date. The measurement of deferred tax liabilities reflects the tax consequences
that would follow from the manner in which the entity expects, at the reporting date, to recover or settle the carrying
amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax and when
the balances relate to taxes levied by the same taxation authority and the entity intends to settle its tax assets and
liabilities on a net basis.
Current and deferred tax for the period
Current and deferred tax is recognised as an expense or income in the Statement of Profit or Loss and Other
Comprehensive Income, except when it relates to items credited or debited to equity, in which case the deferred tax is
also recognised directly in equity, or where it arises from initial accounting for a business combination, in which case it
is taken into account in the determination of goodwill or gain from a bargain purchase.
d) Employee entitlements
Provision is made for the company’s liability for employee benefits arising from services rendered by employees to
balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts
expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year
have been measured at the present value of the estimated future cash outflows to be made for those benefits.
The company contributes to a defined contribution plan. Contributions to employee superannuation funds are charged
against income as incurred.
Notes to the financial statements (continued)
20 Annual Report Broadwater Financial Services Limited
Note 1. Summary of significant accounting policies (continued)
e) Cash and cash equivalents
For the purposes of the Statement of Cash Flows, cash includes cash on hand and in banks and investments in
money market instruments, net of outstanding bank overdrafts. Bank overdrafts are shown within borrowings in current
liabilities on the Balance Sheet.
f) Trade receivables and payables
Receivables are carried at their amounts due. The collectability of debts is assessed at balance date and specific
provision is made for any doubtful accounts. Liabilities for trade creditors and other amounts are carried at cost that is
the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the
company.
g) Property, plant and equipment
Plant and equipment, leasehold improvements and equipment under finance lease are stated at cost less accumulated
depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In
the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the
amounts payable in the future to their present value as at the date of acquisition.
Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation
is calculated on a straight line basis so as to write off the net cost of each asset over its expected useful life to its
estimated residual value. Leasehold improvements are depreciated at the rate equivalent to the available building
allowance using the straight line method. The estimated useful lives, residual values and depreciation method are
reviewed at the end of each annual reporting period.
The following estimated useful lives are used in the calculation of depreciation:
• leasehold improvements 5 - 40 years
• plant and equipment 2.5 - 20 years
• motor vehicles 5 years
h) Intangibles
The franchise fee paid to Bendigo and Adelaide Bank Limited has been recorded at cost and is amortised on a straight
line basis over the life of the franchise agreement.
The renewal processing fee paid to Bendigo and Adelaide Bank Limited when renewing the franchise agreement has
also been recorded at cost and is amortised on a straight line basis over the life of the franchise agreement.
i) Payment terms
Receivables and payables are non interest bearing and generally have payment terms of between 30 and 90 days.
j) Borrowings
All loans are initially measured at the principal amount. Interest is recognised as an expense as it accrues.
k) Financial instruments
Recognition and initial measurement
Financial instruments, incorporating financial assets and financial liabilities are recognised when the entity becomes a
party to the contractual provisions of the instrument.
Notes to the financial statements (continued)
Broadwater Financial Services Limited Annual Report 21
Note 1. Summary of significant accounting policies (continued)
k) Financial instruments (continued)
Recognition and initial measurement (continued)
Financial instruments (except for trade receivables) are initially measured at fair value plus transaction costs, except
where the instrument is classified at fair value through profit or loss, in which case transaction costs are expensed to
profit or loss immediately. Where available, quoted prices in an active market are used to determine fair value. In other
circumstances, valuation techniques are adopted.
Trade receivables are initially measured at the transaction price if the trade receivables do not contain a significant
financing component or if the practical expedient was applied as specified in AASB 15.63.
Classification and subsequent measurement
(i) Financial liabilities
Financial liabilities include borrowings, trade and other payables and non-derivative financial liabilities (excluding
financial guarantees). They are subsequently measured at amortised cost using the effective interest rate method.
The effective interest rate is the internal rate of return of the financial asset or liability, that is, it is the rate that exactly
discounts the estimated future cash flows through the expected life of the instrument to the net carrying amount at
initial recognition.
(iv) Financial assets
Financial assets are subsequently measured at:
- amortised cost;
- fair value through other comprehensive income (FVOCI); or
- fair value through profit and loss (FVTPL).
A financial asset is subsequently measured at amortised cost if it meets the following conditions:
- the financial asset is managed solely to collect contractual cash flows; and
- the contractual terms within the financial asset give rise to cash flows that are solely payments of principal and
interest on the principle amount outstanding on specified dates.
The company’s trade and most other receivables are measured at amortised cost as well as deposits that were
previously classified as held-to-maturity under AASB 139.
A financial asset is subsequently measured at FVOCI if it meets the following conditions:
- the contractual terms within the financial asset give rise to cash flows that are solely payments of principal and
interest on the principle amount outstanding on specified dates; and
- the business model for managing the financial assets comprises both contractual cash flows collection and the
selling of the financial asset.
By default, all other financial assets that do not meet the conditions of amortised cost and FVOCI’s measurement
condition are subsequently measured at FVTPL.
The company’s investments in equity instruments are measured at FVTPL unless the company irrevocably elects at
inception to measure at FVOCI.
Notes to the financial statements (continued)
22 Annual Report Broadwater Financial Services Limited
Note 1. Summary of significant accounting policies (continued)
k) Financial instruments (continued)
Derecognition
(i) Derecognition of financial liabilities
A liability is derecognised when it is extinguished (ie when the obligation in the contract is discharged, cancelled or
expires). An exchange of an existing financial liability for a new one with substantially modified terms, or a substantial
modification to the terms of a financial liability, is treated as an extinguishment of the existing liability and recognition
of a new financial liability.
The difference between the carrying amount of the financial liability derecognised and the consideration paid and
payable, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
(ii) Derecognition of financial assets
A financial asset is derecognised when the holder’s contractual rights to its cash flows expires, or the asset is
transferred in such a way that all the risks and rewards of ownership are substantially transferred.
On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount
and the sum of the consideration received and receivable is recognised in profit or loss.
Impairment
The company recognises a loss allowance for expected credit losses on:
- financial assets that are measured at fair value through other comprehensive income;
- lease receivables;
- loan commitments that are not measured at fair value through profit or loss; and
- financial guarantee contracts that are not measured at fair value through profit or loss.
Loss allowance is not recognised for:
- financial assets measured at fair value through profit of loss; or
- equity instruments measured at fair value through other comprehensive income.
Expected credit losses are the probability-weighted estimate of credit losses over the expected life of a financial
instrument. A credit loss is the difference between all contractual cash flows that are due and all cash flows expected
to be received, all discounted at the original effective interest rate of the financial instrument.
The company uses the simplified approach to impairment, as applicable under AASB 9. The simplified approach does
not require tracking of changes in credit risk at every reporting period, but instead requires the recognition of lifetime
expected credit loss at all times.
This approach is applicable to:
- trade receivables that result from transactions that are within the scope of AASB 15, that contain a significant
financing component; and
- lease receivables.
In measuring the expected credit loss, a provision matrix for trade receivables is used, taking into consideration various
data to get to an expected credit loss, (ie diversity of its customer base, appropriate groupings of its historical loss
experience etc.).
Notes to the financial statements (continued)
Broadwater Financial Services Limited Annual Report 23
Note 1. Summary of significant accounting policies (continued)
k) Financial instruments (continued)
Recognition of expected credit losses in financial statements
At each reporting date, the entity recognises the movement in the loss allowance as an impairment gain or loss in the
statement of profit or loss and other comprehensive income.
Assets measured at fair value through other comprehensive income are recognised at fair value with changes in fair
value recognised in other comprehensive income. The amount in relation to change in credit risk is transferred from
other comprehensive income to profit or loss at every reporting period.
l) Leases
Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not
the legal ownership are transferred to the company are classified as finance leases. Finance leases are capitalised
by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the
present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated
between the reduction of the lease liability and the lease interest expense for the period.
Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease
term. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are
charged as expenses in the periods in which they are incurred. Lease incentives under operating leases are recognised
as a liability and amortised on a straight-line basis over the life of the lease term.
m) Provisions
Provisions are recognised when the economic entity has a legal, equitable or constructive obligation to make a future
sacrifice of economic benefits to other entities as a result of past transactions of other past events, it is probable
that a future sacrifice of economic benefits will be required and a reliable estimate can be made of the amount of the
obligation.
A provision for dividends is not recognised as a liability unless the dividends are declared, determined or publicly
recommended on or before the reporting date.
n) Issued capital
Ordinary shares are recognised at the fair value of the consideration received by the company. Any transaction costs
arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.
o) Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company, excluding any
costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares issued during the year.
p) Goods and Services Tax
Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (GST), except where the
amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised
as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or
payable to, the taxation authority is included as part of receivables or payables in the Balance Sheet. Cash flows are
included in the Statement of Cash Flows on a gross basis.
The GST components of cash flows arising from investing and financing activities which are recoverable from, or
payable to, the taxation authority are classified as operating cash flows.
Notes to the financial statements (continued)
24 Annual Report Broadwater Financial Services Limited
Note 2. Financial risk managementThe company’s activities expose it to a limited variety of financial risks: market risk (including currency risk, fair
value interest risk and price risk), credit risk, liquidity risk and cash flow interest rate risk. The company’s overall risk
management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse
effects on the financial performance of the entity. The entity does not use derivative instruments.
Risk management is carried out directly by the board of directors.
(i) Market risk
The company has no exposure to any transactions denominated in a currency other than Australian dollars.
(ii) Price risk
The company is not exposed to equity securities price risk as it does not hold investments for sale or at fair value. The
company is not exposed to commodity price risk.
(iii) Credit risk
The company has no significant concentrations of credit risk. It has policies in place to ensure that customers have an
appropriate credit history.
Expected credit loss assessment for Bendigo and Adelaide Bank Limited
The company’s franchise agreement limits the company’s credit exposure to one financial institution, being Bendigo and
Adelaide Bank Limited. Due to the reliance on Bendigo and Adelaide Bank Limited the company has reviewed the credit
ratings provided by Standard & Poors, Moody’s and Fitch Ratings to determine the level of credit risk exposure of the
company. The most recent credit rating provided by the ratings agencies is as follows:
Ratings Agency Long-Term Short-Term Outlook
Standard & Poor’s BBB+ A-2 Stable
Fitch Ratings A - F2 Stable
Moody’s A3 P-2 Stable
Based on the above risk ratings the company has classified Bendigo and Adelaide Bank Limited as low risk.
The company has performed a historical assessment of receivables from Bendigo and Adelaide Bank Limited and
found no instances of default. As a result no impairment loss allowance has been made in relation to the Bendigo and
Adelaide Bank Limited receivable as at 30 June 2019.
Expected credit loss assessment for other customers
The company has performed a historical assessment of the revenue collected from other customers and found no
instances of default. As a result no impairment loss allowance has been made in relation to other customers as at
30 June 2019.
(iv) Liquidity risk
Prudent liquidity management implies maintaining sufficient cash and marketable securities and the availability of
funding from credit facilities. The company believes that its sound relationship with Bendigo and Adelaide Bank Limited
mitigates this risk significantly.
(v) Cash flow and fair value interest rate risk
Interest-bearing assets are held with Bendigo and Adelaide Bank Limited and subject to movements in market interest.
Interest-rate risk could also arise from long-term borrowings. Borrowings issued at variable rates expose the company
to cash flow interest-rate risk. The company believes that its sound relationship with Bendigo and Adelaide Bank
Limited mitigates this risk significantly.
Notes to the financial statements (continued)
Broadwater Financial Services Limited Annual Report 25
Note 2. Financial risk management (continued)
(vi) Capital management
The board’s policy is to maintain a strong capital base so as to sustain future development of the company. The board
of directors monitor the return on capital and the level of dividends to shareholders. Capital is represented by total
equity as recorded in the Balance Sheet.
In accordance with the franchise agreement, in any 12 month period, the funds distributed to shareholders shall not
exceed the distribution limit.
The distribution limit is the greater of:
(a) 20% of the profit or funds of the franchisee otherwise available for distribution to shareholders in that 12 month
period; and
(b) subject to the availability of distributable profits, the relevant rate of return multiplied by the average level of share
capital of the franchisee over that 12 month period where the relevant rate of return is equal to the weighted
average interest rate on 90 day bank bills over that 12 month period plus 5%.
The board is managing the growth of the business in line with this requirement. There are no other externally imposed
capital requirements, although the nature of the company is such that amounts will be paid in the form of charitable
donations and sponsorship. Charitable donations and sponsorship paid for the year ended 30 June 2019 can be seen
in the Statement of Profit or Loss and Other Comprehensive Income.
There were no changes in the company’s approach to capital management during the year.
Note 3. Critical accounting estimates and judgementsEstimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that may have a financial impact on the entity and that are believed to be
reasonable under the circumstances.
The company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results.
Management has identified the following critical accounting policies for which significant judgements, estimates and
assumptions are made. Actual results may differ from these estimates under different assumptions and conditions and
may materially affect financial results or the financial position reported in future periods.
Further details of the nature of these assumptions and conditions may be found in the relevant notes to the financial
statements.
Taxation
Judgement is required in assessing whether deferred tax assets and certain tax liabilities are recognised on the
balance sheet. Deferred tax assets, including those arising from carried-forward tax losses, capital losses and
temporary differences, are recognised only where it is considered more likely than not that they will be recovered, which
is dependent on the generation of sufficient future taxable profits.
Assumptions about the generation of future taxable profits depend on management’s estimates of future cash flows.
These depend on estimates of future sales volumes, operating costs, capital expenditure, dividends and other capital
management transactions. Judgements are also required about the application of income tax legislation.
These judgements and assumptions are subject to risk and uncertainty. There is therefore a possibility that changes
in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax
liabilities recognised on the balance sheet and the amount of other tax losses and temporary differences not yet
recognised. In such circumstances, some or all of the carrying amount of recognised deferred tax assets and liabilities
may require adjustment, resulting in corresponding credit or charge to the Statement of Profit or Loss and Other
Comprehensive Income.
Notes to the financial statements (continued)
26 Annual Report Broadwater Financial Services Limited
Note 3. Critical accounting estimates and judgements (continued)
Estimation of useful lives of assets
The estimation of the useful lives of assets has been based on historical experience and the condition of the asset
is assessed at least once per year and considered against the remaining useful life. Adjustments to useful lives are
made when considered necessary.
Impairment of assets
At each reporting date, the company reviews the carrying amounts of its tangible and intangible assets that have an
indefinite useful life to determine whether there is any indication that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the
entity estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset for which the estimates of future
cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount,
the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is
recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment
loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is
increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount
does not exceed the carrying amount that would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss
immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is
treated as a revaluation increase.
2019 2018 $ $
Note 4. Revenue from ordinary activitiesOperating activities:
- gross margin 814,086 766,058
- services commissions 63,826 57,735
- fee income 77,210 82,456
- market development fund 76,419 77,500
Total revenue from operating activities 1,031,541 983,749
Non-operating activities:
- other revenue - 100
Total revenue from non-operating activities - 100
Total revenues from ordinary activities 1,031,541 983,849
Notes to the financial statements (continued)
Broadwater Financial Services Limited Annual Report 27
2019 2018 $ $
Note 5. Expenses Depreciation of non-current assets:
- plant and equipment 1,945 2,461
- leasehold improvements 10,948 12,847
- motor vehicles 4,249 4,249
Amortisation of non-current assets:
- franchise fee 4,477 4,477
- franchise renewal fee 20,146 20,146
41,765 44,180
Finance costs:
- interest paid 24,721 22,428
- Bad debts 1,251 1,018
- Loss on disposal of asset - 1,625
Note 6. Income tax creditThe components of tax credit comprise:
- Future income tax benefit attributable to losses (11,314) (18,608)
- Movement in deferred tax (1,290) 3,830
- Under/Over provision in respect to prior years (825)
(13,429) (14,778)
The prima facie tax on loss from ordinary activities before income tax
is reconciled to the income tax credit as follows
Operating loss (45,833) (56,741)
Prima facie tax on profit from ordinary activities at 27.5% (2018: 27.5%) (12,604) (14,779)
Add tax effect of:
- non-deductible expenses - 447
- timing difference expenses 1,290 (4,276)
- other deductible expenses (825) -
(12,139) (18,608)
Movement in deferred tax (1,290) 3,830
(13,429) (14,778)
Notes to the financial statements (continued)
28 Annual Report Broadwater Financial Services Limited
Note 2019 2018 $ $
Note 7. Cash and cash equivalents Cash at bank and on hand 25,500 24,417
Note 7.(a) Reconciliation to cash flow statement
The above figures reconcile to the amount of cash shown in the statement
of cash flows at the end of the financial year as follows:
Cash at bank and on hand 25,500 24,417
Bank overdraft 13 (297,225) (270,244)
(271,725) (245,827)
Note 8. Trade and other receivables Trade receivables 36,602 49,128
Prepayments 5,448 5,797
Other receivables and accruals - 1,108
42,050 56,033
Note 9. Property, plant and equipmentLeasehold improvements
At cost 287,606 287,606
Less accumulated depreciation (113,710) (102,762)
173,896 184,844
Plant and equipment
At cost 53,766 49,333
Less accumulated depreciation (35,275) (33,330)
18,491 16,003
Motor vehicles
At cost 21,244 21,244
Less accumulated depreciation (9,581) (5,332)
11,663 15,912
Total written down amount 204,050 216,759
Notes to the financial statements (continued)
Broadwater Financial Services Limited Annual Report 29
2019 2018 $ $
Note 9. Property, plant and equipment (continued)
Movements in carrying amounts:
Leasehold improvements
Carrying amount at beginning 184,844 192,472
Additions - 6,844
Disposals - (1,625)
Less: depreciation expense (10,948) (12,847)
Carrying amount at end 173,896 184,844
Plant and equipment
Carrying amount at beginning 16,003 17,193
Additions 4,433 1,271
Less: depreciation expense (1,945) (2,461)
Carrying amount at end 18,491 16,003
Motor vehicles
Carrying amount at beginning 15,912 20,161
Less: depreciation expense (4,249) (4,249)
Carrying amount at end 11,663 15,912
Total written down amount 204,050 216,759
Note 10. Intangible assetsEstablishment fee
At cost 32,019 32,019
Less: accumulated amortisation (32,019) (32,019)
- -
Franchise fee
At cost 92,384 92,384
Less: accumulated amortisation (81,938) (77,462)
10,446 14,922
Renewal processing fee
At cost 140,730 140,730
Less: accumulated amortisation (93,723) (73,577)
47,007 67,153
Total written down amount 57,453 82,075
Notes to the financial statements (continued)
30 Annual Report Broadwater Financial Services Limited
Note 2019 2018 $ $
Note 11. Tax Deferred tax assets
- accruals 798 468
- employee provisions 5,797 4,159
- tax losses carried forward 171,032 158,893
177,627 163,520
Deferred tax liability
- property, plant and equipment 11,811 11,134
11,811 11,134
Net deferred tax asset 165,816 152,386
Movement in deferred tax charged to Statement of Profit
or Loss and Other Comprehensive Income (13,430) (14,778)
Note 12. Trade and other payables Current:
Trade creditors 6,822 22,175
Other creditors and accruals 83,862 36,394
90,684 58,569
Non-current:
Other creditors and accruals 27,085 81,255
Note 13. BorrowingsCurrent:
Bank overdrafts 297,225 270,244
Chattel mortgage 18 11,424 6,297
Bank loans 21,768 21,768
330,417 298,309
Non-current:
Chattel mortgage 18 - 11,146
Bank loans 149,723 158,986
149,723 170,132
Notes to the financial statements (continued)
Broadwater Financial Services Limited Annual Report 31
Note 13. Borrowings (continued)
The approved overdraft limit is $350,000. Interest is charged at a rate of 3.21% (2018: 4.03%), with the overdraft first
commencing 1 February 2013. The debt is secured by a fixed and floating charge over the company’s assets and is
subject to quarterly reviews by Bendigo Bank.
The bank loan is repayable monthly. Interest is recognised at an average rate of 7.05% (2018: 7.26%). The loan are
secured by a fixed and floating charge over the company’s assets. In January 2016 a $200,000 bank loan was taken
out to repay two loans previously held by the company.
2019 2018 $ $
Note 14. Provisions Current:
Provision for annual leave 1,580 4,985
Provision for long service leave 9,298 5,506
10,878 10,491
Non-current:
Provision for long service leave 10,203 4,631
Note 15. Issued capital 592,038 ordinary shares fully paid (2018: 592,038) 444,025 444,025
Less: equity raising expenses (37,167) (37,167)
406,858 406,858
A bonus share issue on a 1:3 basis (148,013 shares) was issued to all existing shareholders on 18 June 2010.
Rights attached to shares
(a) Voting rights
Subject to some limited exceptions, each member has the right to vote at a general meeting.
On a show of hands or a poll, each member attending the meeting (whether they are attending the meeting in
person or by attorney, corporate representative or proxy) has one vote, regardless of the number of shares held.
However, where a person attends a meeting in person and is entitled to vote in more than one capacity (for
example, the person is a member and has also been appointed as proxy for another member) that person may only
exercise one vote on a show of hands. On a poll, that person may exercise one vote as a member and one vote for
each other member that person represents as duly appointed attorney, corporate representative or proxy.
The purpose of giving each member only one vote, regardless of the number of shares held, is to reflect the
nature of the company as a community based company, by providing that all members of the community who have
contributed to the establishment and ongoing operation of the Community Bank branch have the same ability to
influence the operation of the company.
Notes to the financial statements (continued)
32 Annual Report Broadwater Financial Services Limited
Note 15. Issued capital (continued)
Rights attached to shares (continued)
(b) Dividends
Generally, dividends are payable to members in proportion to the amount of the share capital paid up on the shares
held by them, subject to any special rights and restrictions for the time being attaching to shares. The franchise
agreement with Bendigo and Adelaide Bank Limited contains a limit on the level of profits or funds that may be
distributed to shareholders. There is also a restriction on the payment of dividends to certain shareholders if they
have a prohibited shareholding interest (see below).
(c) Transfer
Generally, ordinary shares are freely transferable. However, the directors have a discretion to refuse to register a
transfer of shares.
Subject to the foregoing, shareholders may transfer shares by a proper transfer effected in accordance with the
company’s constitution and the Corporations Act 2001.
Prohibited shareholding interest
A person must not have a prohibited shareholding interest in the company.
In summary, a person has a prohibited shareholding interest if any of the following applies:
• They control or own 10% or more of the shares in the company (the “10% limit”).
• In the opinion of the board they do not have a close connection to the community or communities in which the
company predominantly carries on business (the “close connection test”).
• Where the person is a shareholder, after the transfer of shares in the company to that person the number of
shareholders in the company is (or would be) lower than the base number (the “base number test”). The base
number is 250. As at the date of this report, the company had 300 shareholders.
As with voting rights, the purpose of this prohibited shareholding provision is to reflect the community-based nature of
the company.
Where a person has a prohibited shareholding interest, the voting and dividend rights attaching to the shares in which
the person (and his or her associates) have a prohibited shareholding interest, are suspended.
The board has the power to request information from a person who has (or is suspected by the board of having) a legal
or beneficial interest in any shares in the company or any voting power in the company, for the purpose of determining
whether a person has a prohibited shareholding interest. If the board becomes aware that a member has a prohibited
shareholding interest, it must serve a notice requiring the member (or the member’s associate) to dispose of the
number of shares the board considers necessary to remedy the breach. If a person fails to comply with such a notice
within a specified period (that must be between three and six months), the board is authorised to sell the specified
shares on behalf of that person. The holder will be entitled to the consideration from the sale of the shares, less any
expenses incurred by the board in selling or otherwise dealing with those shares.
In the constitution, members acknowledge and recognise that the exercise of the powers given to the board may cause
considerable disadvantage to individual members, but that such a result may be necessary to enforce the prohibition.
Notes to the financial statements (continued)
Broadwater Financial Services Limited Annual Report 33
2019 2018 $ $
Note 16. Accumulated lossesBalance at the beginning of the financial year (498,575) (456,612)
Net loss from ordinary activities after income tax (32,404) (41,963)
Balance at the end of the financial year (530,979) (498,575)
Note 17. Statement of cash flows Reconciliation of loss from ordinary activities after tax to net cash provided
by/(used in) operating activities
Loss from ordinary activities after income tax (32,404) (41,963)
Non cash items:
- depreciation 17,142 19,557
- amortisation 24,623 24,623
- loss on disposal of asset - 1,625
Changes in assets and liabilities:
- (increase)/decrease in receivables 13,982 (6,771)
- increase in other assets (13,429) (14,778)
- increase/(decrease) in payables 2,567 (14,367)
- increase/(decrease) in provisions 5,959 (6,327)
Net cash flows provided by/(used in) operating activities 18,440 (38,401)
Note 18. LeasesFinance lease commitments
Payable - minimum lease payments:
- not later than 12 months 11,438 6,985
- between 12 months and 5 years - 11,439
Minimum lease payments 11,438 18,424
Less future finance charges (14) (981)
Present value of minimum lease payments 11,424 17,443
The finance lease for the motor vehicle, which commenced in Aprl 2017, is a three-year lease. Interest is recognised at
an average rate of 4.725% (2018: 4.725%).
Notes to the financial statements (continued)
34 Annual Report Broadwater Financial Services Limited
2019 2018 $ $
Note 18. Leases (continued)
Operating lease commitments
Non-cancellable operating leases contracted for but not capitalised
in the financial statements
Payable - minimum lease payments:
- not later than 12 months 104,658 90,110
- between 12 months and 5 years 103,054 201,084
207,712 291,194
The Biggera Waters and Helensvale Branch lease’s are non-cancellable lease’s with five-year terms, with rent payable
monthly in advance. The lease for Biggera Waters commenced in July 2017 and the lease for Helensville commenced
in August 2015. Both leases have one five year term remaining.
2019 2018 $ $
Note 19. Auditor’s remuneration Amounts received or due and receivable by the auditor of the company for:
- audit and review services 4,600 4,400
- share registry services 1,885 1,885
- non audit services 2,810 2,562
9,295 8,847
Note 20. Director and related party disclosures The names of directors who have held office during the financial year are:
Robert John Knight
Leeanne Kay Braund
Stephen Michael O’Donoghue
Michael Douglas McCarthy
Malcolm John Orman (Appointed 4 August 2018)
Trevor Newton Jones (Resigned 18 October 2018)
No director or related entity has entered into a material contract with the company. No director’s fees have been paid
as the positions are held on a voluntary basis.
Notes to the financial statements (continued)
Broadwater Financial Services Limited Annual Report 35
Note 20. Director and related party disclosures (continued)
Directors’ Shareholdings 2019 2018
Robert John Knight 667 667
Leeanne Kay Braund - -
Stephen Michael O’Donoghue 42,667 42,667
Michael Douglas McCarthy - -
Malcolm John Orman (Appointed 4 August 2018) - -
Trevor Newton Jones (Resigned 18 October 2018) - -
2019 2018 $ $
Note 21. Franking account balanceFranking credits available for subsequent reporting periods are:
- franking account balance as at the end of the financial year 23,898 23,898
- franking credits that will arise from payment of income tax as at the end
of the financial year - -
- franking debits that will arise from the payment of dividends recognised
as a liability at the end of the financial year - -
Franking credits available for future financial reporting periods: 23,898 23,898
- franking debits that will arise from payment of dividends proposed or declared
before the financial report was authorised for use but not recognised as a
distribution to equity holders during the period - -
Net franking credits available 23,898 23,898
Note 22. Key management personnel disclosuresNo director of the company receives remuneration for services as a company director or committee member.
There are no executives within the company whose remuneration is required to be disclosed.
Note 23. Earnings per share(a) Loss attributable to the ordinary equity holders of the company used
in calculating earnings per share (32,404) (41,963)
Number Number
(b) Weighted average number of ordinary shares used as the denominator
in calculating basic earnings per share 592,038 592,038
Notes to the financial statements (continued)
36 Annual Report Broadwater Financial Services Limited
Note 24. Events occurring after the reporting dateThere have been no events after the end of the financial year that would materially affect the financial statements.
Note 25. Contingent liabilities and contingent assetsThere were no contingent liabilities or contingent assets at the date of this report to affect the financial statements.
Note 26. Segment reportingThe economic entity operates in the service sector where it facilitates Community Bank services in Biggera Waters and
Helensvale, Queensland pursuant to a franchise agreement with Bendigo and Adelaide Bank Limited.
Note 27. Registered office/Principal place of businessThe entity is a company limited by shares, incorporated and domiciled in Australia. The registered office and principal
place of business is:
Registered Office Principal Place of Business
33 Hollywell Road 33 Hollywell Road
Biggera Waters QLD 4216 Biggera Waters QLD 4216
Note 28. Financial instruments
Financial Instrument Composition and Maturity Analysis
The table below reflects the undiscounted contractual settlement terms for all financial instruments, as well as the
settlement period for instruments with a fixed period of maturity and interest rate.
Financial instrument
Floating interestFixed interest rate maturing in Non interest
bearingWeighted average1 year or less Over 1 to 5 years Over 5 years
2019$
2018$
2019$
2018$
2019$
2018$
2019$
2018$
2019$
2018$
2019%
2018%
Financial assets
Cash and cash equivalents
25,500 24,017 - - - - - - - 400 Nil Nil
Receivables - - - - - - - - 36,602 49,128 N/A N/A
Financial liabilities
Interest bearing liabilities
297,225 270,244 33,192 28,065 149,723 170,132 - - - - 5.27 5.22
Payables - - - - - - - - 6,822 22,175 N/A N/A
Notes to the financial statements (continued)
Broadwater Financial Services Limited Annual Report 37
Note 28. Financial instruments (continued)
Net Fair Values
The net fair values of financial assets and liabilities approximate the carrying values as disclosed in the balance sheet.
The company does not have any unrecognised financial instruments at the year end.
Credit Risk
The maximum exposure to credit risk at balance date to recognised financial assets is the carrying amount of those
assets as disclosed in the balance sheet and notes to the financial statements.
There are no material credit risk exposures to any single debtor or group of debtors under financial instruments entered
into by the economic entity.
Interest Rate Risk
Interest rate risk refers to the risk that the value of a financial instrument or cash flows associated with the instrument
will fluctuate due to changes in market interest rates. Interest rate risk arises from the interest bearing financial assets
and liabilities in place subject to variable interest rates, as outlined above.
Sensitivity Analysis
The company has performed sensitivity analysis relating to its exposure to interest rate risk at balance date. This
sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in
interest rates.
As at 30 June 2019, the effect on profit and equity as a result of changes in interest rate, with all other variables
remaining constant would be as follows:
2019 2018 $ $
Change in profit/(loss)
Increase in interest rate by 1% (4,546) (4,444)
Decrease in interest rate by 1% 4,546 4,444
Change in equity
Increase in interest rate by 1% (4,546) (4,444)
Decrease in interest rate by 1% 4,546 4,444
Notes to the financial statements (continued)
38 Annual Report Broadwater Financial Services Limited
In accordance with a resolution of the directors of Broadwater Financial Services Limited, we state that:
In the opinion of the directors:
(a) the financial statements and notes of the company are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the company’s financial position as at 30 June 2019 and of its performance for the
financial year ended on that date; and
(ii) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become
due and payable.
(c) the audited remuneration disclosures set out in the remuneration report section of the directors’ report comply with
Accounting Standard AASB124 Related Party Disclosures and the Corporations Regulations 2001.
This declaration is made in accordance with a resolution of the board of directors.
Robert John Knight
Chairman
Signed on the 24th of September 2019.
Directors’ declaration
Broadwater Financial Services Limited Annual Report 39
Independent auditor’s report to the members of Broadwater Financial Services Limited Report on the audit of the financial report Our opinion In our opinion, the accompanying financial report of Broadwater Financial Services Limited, is in accordance with the Corporations Act 2001, including: i. giving a true and fair view of the company’s financial position as at 30 June 2019 and of its financial
performance for the year ended; and ii. complying with Australian Accounting Standards. What we have audited Broadwater Financial Services Limited’s (the company) financial report comprises the:
Statement of profit or loss and other comprehensive income Balance sheet Statement of changes in equity Statement of cash flows Notes comprising a summary of significant accounting policies and other explanatory notes The directors' declaration of the company. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We are independent of the company in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Material uncertainty related to going concern Our opinion is not modified for this matter. We draw attention to Note 1 in the financial report, which indicates that the company incurred a net loss after tax of $32,404 during the year ended 30 June 2019, and as of that date, the company’s liabilities exceeded its total assets by $124,121. These conditions, along with other matters as set forth in Note 1, indicate the existence of a material uncertainty that may cast significant doubt over the company’s ability to continue as a going concern and therefore, the company may be unable to realise its assets and discharge its liabilities in the normal course of business.
Independent audit report
40 Annual Report Broadwater Financial Services Limited
Other information The company usually prepares an annual report that will include the financial statements, directors’ report and declaration and our independence declaration and audit report (the financial report). The annual report may also include “other information” on the entity’s operations and financial results and financial position as set out in the financial report, typically in a Chairman’s report and Manager’s report, and reports covering governance and shareholder matters.The directors are responsible for the other information. The annual report is expected to be made available to us after the date of this auditor's report. Our opinion on the financial report does not cover the other information and accordingly we will not express any form of assurance conclusion thereon. Our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify that a material inconsistency appears to exist when we read the annual report (or become aware that the other information appears to be materially misstated), we will discuss the matter with the directors and where we believe that a material misstatement of the other information exists, we will request management to correct the other information. Directors’ responsibility for the financial report The directors of the company are responsible for the preparation of the financial report that it gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or cease operations, or have no realistic alternative but to do so. Auditor’s responsibility for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatement can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/home.aspx. This description forms part of our auditor’s report.
Andrew Frewin Stewart Joshua Griffin 61 Bull Street, Bendigo, 3550 Lead Auditor Dated: 24 September 2019
Independent audit report (continued)
Biggera Waters Community Bank BranchMetro Market Shopping Centre,
33 Hollywell Road, Biggera Waters QLD 4216Phone: (07) 5537 6725 Fax: (07) 5563 8366
www.bendigobank.com.au/biggera_waters
Helensvale Community Bank BranchHelensvale Plaza Shopping Centre,
12 Sir John Overall Drive, Helensvale QLD 4212Phone: (07) 5580 3966 Fax: (07) 5580 6622
www.bendigobank.com.au/helensvale
Franchisee: Broadwater Financial Services LimitedMetro Market Shopping Centre,
33 Hollywell Road, Biggera Waters QLD 4216Phone: (07) 5537 6725 Fax: (07) 5563 8366
ABN: 29 095 850 463
www.facebook.com/BiggeraWatersCommunityBankBranchHelensvaleBranch
(BNPAR19010) (10/19)
bendigobank.com.au